The insurance authority will become stronger than the insurance committee

Kathmandu - After 4 years of being introduced in the House of Representatives of the Federal Parliament, the Bill (Insurance Law 2079) has been passed to amend and unify the insurance laws. The bill passed by the House of Representatives will be implemented as an Act after it is passed by the National Assembly and certified by the President.

With the passing of the Insurance Bill, the regulatory body of the insurance sector will become the Insurance Authority and not the Insurance Committee. Although it is a regulatory body, Finance Minister Janadarn Sharma said in the Parliament that the Insurance Act has given autonomy to the committee which has been playing the role of one of the departments of the Ministry of Finance.

The Insurance Act, which was passed by the House of Representatives, has made a new arrangement through the process of appointing the chairman, who will be the executive authority of the authority. There is a provision that the government of Nepal can appoint or appoint a person with special knowledge in insurance business to the post of chairman, now a recommendation committee will be formed to appoint the chairman.

In the recommendation committee to be led by the vice president of the National Planning Commission, there is an arrangement to form a recommendation committee consisting of the secretary of the Ministry of Finance and one expert member in the related field. The Act provides that the recommendation committee will recommend the names of 3 people and one of them will be appointed as the chairman of the committee.

From the appointment of the chairman to the selection of directors, the new insurance law has come to give preference to people with experience in the relevant field. The Insurance Bill stipulates that there must be one woman director in the board of directors of the authority.

Answering the questions raised by MPs during the discussion on the bill and the amendment draft prepared by the finance committee, Finance Minister Janardan Sharma said that the committee was made an autonomous body with accountability.

The insurance authority has not stopped working independently. The bill defines it as an autonomous organization with rights. There will be no interference," he said. "The authority has the authority to decide how many licenses to grant and how many institutions to open, how to mobilize the necessary capital."

He said that Finance Minister Janardhan's Insurance Bill in the Parliament has opened the way for the reform of the insurance business by giving a license to do micro insurance business and establishing an insurance promotion fund.

Could not form an autonomous body

Although the finance minister claimed to have granted autonomy to the insurance authority, the former chairman of the committee, Chiranjeevi Chapagai, says that he has not been granted autonomy. He claimed that although the committee was made a regulatory body, it could not be made an autonomous body.

In the insurance bill, the appointment of the authority's employees shall be as per the prescribed remuneration, services, facilities and other provisions, and it has been arranged that the approval of the ministry should be obtained in order to increase the remuneration and facilities of the authority. The former chairman of the committee, Chapagair, says that the insurance authority has not become autonomous even though the law requires the approval of money in the employee service condition regulations.

"In the old law, the committee did not have the right to make regulations on insurance, but the committee did not have the right to make regulations on the number of employees required and what the service conditions would be," he said. . How can employees be autonomous when the insurance authority does not have the right to make decisions.

He objected that if the Ministry of Finance does not give the right to make the employee's compensation to the Board of Directors of the Insurance Authority, then the Insurance Authority will not have autonomy. However, he said that the necessary regulatory authority for the insurance sector has come in the new bill.

"The decision made by the board of directors of the authority, which is the co-secretary of the Ministry of Finance, for the approval of the ministry, is again raised by the authority," he said.

What are the new insurance provisions?

In order to strengthen the insurance sector, the Insurance Act itself has stopped the provision of loans to agents. The bill provides that the insurance company can give loans only to the employees and policy holders of the insurance company. Similarly, out of the amount accumulated in the fund envisaging the authority, it has been arranged that other than fifty percent of the amount allocated annually for the operation, management and insurance development of the authority must be deposited in the federal reserve fund annually.

The bill stipulates that an individual or his single family cannot invest more than 15 percent of the paid-up capital in a company. If such an investment has been made, it has to be brought within the specified limits within 2 years after the bill is approved and implemented. Investors who invest in this way should not invest more than 1 percent when investing in another insurance company doing business of the same nature.

Similarly, the provision that insurance companies have to renew their licenses every year has been removed, while previously the government gave the final approval for life insurance and reinsurance business licenses, now the insurance committee has the right to give the final approval.

If the insurance company is in trouble or if the license of any type of insurance business it is doing is revoked, the authority has given the right to reduce the company's paid-up capital so that it does not fall below the minimum paid-up capital. According to the bill, the assets of the insurance company should exceed the liabilities, and the committee can determine the ratio of total assets and liabilities.

Unless the insurance company arranges the fund and reserve fund to maintain the risk, the minimum paid-up capital is not maintained, the ratio of assets and liabilities is not maintained, and the authority is not allowed to distribute dividends.

The bill that was passed so that the micro insurance business must be done by the insurance company has a provision that only micro insurance can be licensed. Similarly, the payment of micro insurance claims should be completed within 21 days of filing the claim.

With the implementation of the new law, the National Insurance Institute Act 2025 will be repealed and the institute will be converted into a company within 1 year. Similarly, the current chairman of the insurance committee will be the chairman of the authority until the end of his tenure.

Earlier, the then Finance Minister Janardan Sharma had provided in the bill submitted to the Parliament that Chairman and Directors of Insurance Committees would not continue to serve after the Act was passed. However, the report submitted by the Finance Committee with amendments was passed by the Parliament.

The board of directors will also remain in office until the term is completed. The employees of the committee will continue in the authority.

Regulatory fees reduced

Currently, the insurance committee is taking 1 percent of the total insurance fee received from non-life insurance and life insurance business and micro insurance business as a regulatory fee. However, the Insurance Bill 2079 has set a regulation fee of 0.75 percent for life and non-life insurance and only 0.5 percent for micro insurance.

The Insurance Act also envisages the development of insurance. 33 percent of the regulatory fee collected by the insurance committee from the insurance companies will be accumulated in this fund. It is envisioned that an insurance campaign will be conducted for the economically disadvantaged citizens from the Insurance Development Fund to bring them under the scope of insurance. In which the budgetary support of the Government of Nepal as well as the insurance company will also contribute to the expenses to be covered by corporate social responsibility.

Chiranjeevi Chapagain, former chairman of the committee, said that since the insurance act of 2049 did not have strong powers in the regulation and supervision of the insurance sector, the insurance bill 2079 gave it strong powers.

He said that after 2079, there have been various changes in insurance principles and policies, but due to the lack of laws, regulations have been made and regulations have been made.

He said that since the decision of the Board of Directors of the Steering Committee is to be implemented, the bill is not legally valid, and there is also an example of the committee losing the case in court. However, he said that such directives are included in the insurance bill itself and after it is implemented as a law, the insurance authority will be legally empowered to regulate insurance companies.

"The insurance authority will be empowered to regulate insurance regulations and licenses, insurance companies, agents, insurance intermediaries, surveyors, third party insurance brokers, etc. after the new law comes in."

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